Policy Studies

The strategies that raise a country from poor to middle-income status will not work to raise it from middle-income to rich. Poor countries have very different capital stock, labor productivity, land utilization, and capacity for innovation than middle-income countries. Unfortunately, old policies seem politically easy. Many middle-income countries try to become rich by sticking to a development model that no longer works. This is the middle-income trap, and it makes the concept of “the new economic normal” in China a very valuable one. If it is more than a slogan, the new economic normal can help China escape the middle-income trap. It must feature policies that: 1. Increase competition, not cooperation, in the corporate sector. 2. Give farmers sharper rights to their land, as the original reforms did in 1978. 3. Rapidly integrate labor markets, so a shrinking workforce is more productive. 4. Dramatically slow or halt the accumulation of debt to avoid stagnation.

Statistics that divide workers between lower-half and upper-half households should be interpreted with caution: Income and labor force participation are not independent. Few households have more than two working-age adults. When one of them decides to stop working, the result is usually a significant decrease in household income. Thus, participation and income are closely connected. Another way to analyze changes in labor force participation is to focus on household demographics, which are much more stable. We found that the decline in labor force participation rate was greater in households with one prime-working-age adult than in households with two or three. However, because the population of multi-adult households is much larger, more than half of the decline in participation has taken place in multi-adult households.

Neither austerity nor debt forgiveness will solve Greece’s financial woes. The present fix will only last for four months. Here is what will fix the problem: Greece must heal itself. They must make a comprehensive top-to-bottom structural reform of the Greek economy that rests on the simple position of “full steam ahead” on deregulation in all markets dealing with capital and labor. This will unlock the productive capacity of the nation.

Matching efficiency is the productivity of the process for matching jobseekers to available jobs. Many authors have demonstrated a decline in labor-market matching efficiency during the Great Recession. We confirm that matching efficiency has declined in some categories of unemployment, including permanent job loss. Most of the decline is the continuation of a trend that has existed since 2001. Because such a large fraction (about 75 percent) of hiring today occurs out of pools of job-seekers other than the unemployed, the decline in matching efficiency among the unemployed drove up the unemployment rate, but the labor market still generated large volumes of job-finding among groups not counted as unemployed.

Over the last 25 years, the enduring strength of the American economy shines through. While policymakers face economic challenges, the ability of the U.S. economy to provide work for those who seek it has not diminished. Policies to help low-income individuals and families should not presume that the American job-creation machine is broken, or that our recent cyclical challenges portend a “new normal” in the coming decades.

In recent years, the retreat from marriage is concentrated among Americans who do not have college degrees. This means fewer lower-income Americans are living in stable, married homes. This retreat from marriage makes poverty more common and income inequality more extreme than they would otherwise be, and it limits economic opportunity. Men, women, and children from lower-income communities are most affected by the social and economic consequences of this retreat. The retreat from marriage is rooted in economic, policy, and cultural changes. Thus, public and private efforts to renew marriage and family life should be broadly gauged, seeking to strengthen the economic, policy, and cultural foundations of family life for the twenty-first century. Such efforts should focus on the families most affected by the retreat from marriage, namely, lower-income families.

By National Center for Policy Analysis, National Center for Policy Analysis

Special Report, 02/13/2015

Many government efforts discourage wise choices, limit educational opportunities, and create burdensome regulations that hinder entrepreneurship. Efforts to revitalize urban neighborhoods are often hamstrung by government regulations which raise costs, and smart growth urban planning policies reduce both housing affordability and economic opportunities, especially for minorities. Charter schools are smaller and serve a disproportionate and increasing number of minority students. Despite attempts to defund charter schools, parents overwhelmingly support them. Black teenagers bear most of the burden of higher minimum wages as well. Out-of-wedlock births are the second key cause of poverty, and most welfare benefits are restricted to families with children. Thus, having a baby offers a gateway to a generous package of government benefits, which can be lost due to marriage. Government is effectively paying women to have children out of wedlock.

From 1950 to 1991, Japan’s economy was the envy of the world. Since 1992, Japan has been mired in an economic malaise. Japanese voters returned Prime Minister Shinzo Abe to power in 2012 on the promise to finally resuscitate the economy. Two years later, his economic policies, nicknamed “Abenomics,” have yet to bear fruit. In fact, in mid-2014, the economy again slipped into recession. As Japan is a critical political and military ally in the Pacific, it is very much in the interests of the United States that these reforms bear fruit. A resurgent Japanese economy would help make Japan a fuller partner in the alliance, and thereby contribute to peace, stability, and liberty in the region. A more vibrant, freer Japanese economy is also good in its own right, given its importance to the global economy and close integration with the U.S.

Patent abuse is harming the U.S. economy. It interferes with market competition, stymies entrepreneurs and innovators, and ultimately costs consumers in higher prices and decreased availability of products. Much of the debate over patent reform centers on how to make patent defense easier for defendants without undermining legitimate patent claimants. The solution must not unfairly classify certain patent holders as trolls because they hold patents without manufacturing goods. Properly enforced, sound patent policy protects individual innovators and the overall economy. It gives businesses incentives to create, and provides consumers with more choices and better value. But the potential for financial spoils can motivate individuals, corporations, and foreign governments to use their resources and regulatory clout to levy baseless or frivolous claims against would-be competitors. The economic consequences of these actions can be catastrophic for small businesses and inflict significant damage on economies of all sizes.

Missouri’s economy has grown at a slower pace over the past decade than every state in the nation, with the exception of Michigan. Job growth has also lagged. In relatively bad economic conditions, individuals will move to areas offering more jobs, higher incomes, and more favorable tax climates. More Missouri’s residents have relocated out of the state than others have moved in. The individuals who left the state are those who, on net, are making higher incomes, and this can cause problems in the future, as it can make it difficult for state and local governments to fund basic services without resorting to higher taxes. Raising taxes would induce even more individuals (and their incomes) to migrate.

Features

The great domestic challenge facing our country today is America’s large and growing Opportunity Deficit. Up and down our society—which used to be defined by unmatched economic growth and social flourishing—a new and unnatural sclerosis is taking hold. For millions of working families of or aspiring to our middle class,...

The economic recovery since 2009 has been exceptionally slow and does not match the pattern of previous recoveries. One reason for the recovery-less recovery is that new government regulations combined with tighter credit have made it harder than ever to start a business. Those factors have raised the barriers to...

Teaching young students to think critically about public policy issues is no easy task. Teaching it to adults isn’t always easy either. Bob Chitester knows a little bit about both. Back in 1980 he produced the “Free to Choose” television series with Milton Friedman. That series was revolutionary because it...

With the country crawling out of the worst recession since the Great Depression, it’s no surprise that the economy is on everyone’s mind. According to the latest Gallup poll, seven in 10 Americans point to economic issues as the most important problems facing the country.
These worries about the economy...

One of the burning intellectual and policy issues of our day is the poverty in sub-Saharan Africa, attracting the attention of everyone from entrepreneurs such as Bill Gates through movie stars such as Madonna and Angelina Jolie to rock stars such as Bono and Bob Geldof. The World Bank measures...

A few years ago, I ran into the administrator of the Santa Cruz County Redevelopment Agency. Our real estate development company had recently completed a small office building located on the periphery of the agency’s 3,760-acre redevelopment project area and the new tenant, Charles Schwab and Co., was ready to...

A quarter century ago President Ronald Reagan declared in his first inaugural address: "In this present crisis, government is not the solution to our problem; government is the problem. … It is my intention to curb the size and influence of the federal establishment and to demand recognition of the...